What Is Recurring Billing?

Recurring Billing Explained in Less Than 5 Minutes

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Recurring billing is an agreement allowing a business to automatically charge you for a bill or service at regular intervals. Both businesses and consumers can benefit from recurring billing to cover repeat payments for services or subscriptions.

Definition and Examples of Recurring Billing

Recurring billing is an agreement allowing a business to automatically charge you for a bill or service at regular intervals. Depending on your payment method, the company may be required to get your permission before automatically charging your account and to provide you a copy of the agreement.

  • Alternate name: Automated bill pay

Credit card balances are an example of a bill that requires monthly payments. For example, you can set up recurring billing for a credit card payment of $100 that would be deducted from your checking account on a specified date. Your credit card issuer would automatically process the payment without any additional information or authorization from you. The number of payments you’d need to pay off your balance depends on the balance, interest rate, and whether you have additional charges or fees on your account.

How Recurring Billing Works

Recurring billing can streamline the payment process for both businesses and consumers, allowing consumers to automatically pay for goods and services on a predetermined schedule such as daily, weekly, monthly, or annually. A recurring billing agreement can be set up directly with a business online, over the phone, or in person with a payment form.

To set up a recurring billing agreement, you'll provide the business with your payment information, then select a payment amount and a payment interval if the option is available. Depending on the service, the agreement could end on a specific date or after a specific number of payments, or it could continue indefinitely as long as you're a customer. Once the agreement is in place, the business can process the payment as agreed without any additional information from you.

A gym membership is another example of a service that would benefit from recurring billing. You may provide your bank details to cover your regular monthly subscription payment until your contract ends, if one applies, or until you cancel your membership.


If a recurring billing charge will be different from the amount or range you preauthorized (or your most recent payment), the company must notify you 10 days in advance.

Consumers using checking accounts and debit cards for recurring billing are protected by the Electronic Funds Transfer Act, which is enforced through Regulation E. Under the law, businesses are required to get permission before authorizing an automatic payment. You should also receive a copy of the agreement along with instructions for cancelling the agreement.

While authorization isn't a legal requirement for recurring credit card transactions, businesses may opt to get it anyway in case there's a dispute. Credit card processing networks do require businesses that offer free trials with recurring subscriptions to get consumer authorization before enrollment. Businesses must also notify consumers when billing is about to start, as well as provide them with clear information about how to cancel any subsequent transactions.

Pros and Cons of Recurring Billing

  • On-time payments

  • Saves time on bill paying

  • Errors can be easily missed

  • Cancellation could be time-consuming

Pros Explained

  • On-time payments: Payments are automatically processed on the specified date, which eliminates late fees and other late-payment consequences.
  • Saves time on bill paying: You can eliminate the time spent mailing a payment or paying bills online.

Cons Explained

  • Errors can easily be missed: If you're charged incorrectly, you'll have to find the error and work with your biller to have it corrected.
  • Cancellation could be time-consuming: You may have to make a phone call or send a letter to cancel the recurring billing.


You can stop a recurring billing charge by requesting a stop payment through your bank, but your bank may charge a fee.

Alternatives to Recurring Billing

If you don't want to set up recurring billing directly with a business, there are other options.

Bank Online Bill Pay

Many banks and even prepaid debit cards offer automatic bill pay, allowing you to manage more of your bills in one place. Rather than enroll in recurring billing directly with a business, you can create a recurring bill payment through your bank by providing the company, amount, and due date.

Prepaid Gift Card

You can purchase a gift card to cover the subscription cost for many music and video streaming services. Once you load the gift card to your account, the business uses the card balance rather than charging your bank account or credit card.

Key Takeaways

  • Recurring billing allows businesses to save time by automatically charging customers at regular intervals.
  • Consumers get the benefit of timely payments and a more efficient bill payment process.
  • Businesses must get permission before automatically charging a debit card or checking account, and they're required to give you a copy of the agreement.
  • Requirements for credit card authorization for recurring billing is limited to subscriptions that start with a free trial.
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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Chase. "Set Up Automatic Payments." Accessed Sept. 14, 2021.

  2. Consumer Financial Protection Bureau. "How Do Automatic Debit Payments From My Bank Account Work?" Accessed Sept. 14, 2021.

  3. Consumer Financial Protection Bureau. "§1005.10 Preauthorized Transfers." Accessed Sept. 14, 2021.

  4. Visa. "Trial Subscription Updates." Page 2. Accessed Sept. 14, 2021.

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